The vertebrate retina is abutted by retinal pigment epithelium (RPE) cells which provide various support functions regulating the homeostasis of the adjacent photoreceptor cells. RPE cells are developmentally derived from the optic neuroepithelium, as are retinal cells, and genetic manipulations indicate that the epithelial precursors to RPE cells can easily assume retinal cell fates and vice versa. In fact, cell specification is the result of the interplay between extracellular signaling molecules such as fibroblast growth factors or WNTs and transcription factors such as PAX6, MITF, and VAX1/2. Using genetic approaches in mice, we show, for instance, that a reduction in the level of functional PAX6 protein exacerbates the dorsal RPE-to-retina transdifferentiation that is normally found with Mitf mutations, and that overexpression of PAX6 protein alleviates this Mitf-mediated RPE-to-retina transdifferentiation. Further studies show that in the RPE, PAX6 normally reduces the expression of pro-retinogenic genes, while in the retina, it promotes their expression. While PAX6 and MITF thus regulate the boundary between retina and RPE, the ventral homeodomain proteins VAX1 and VAX2 together regulate the boundary between RPE and the epithelial connection to the brain, called the optic stalk. In fact, in Vax1/Vax2 double mutants, the dorsal optic stalk transdifferentiates into an RPE, and in Vax2/Mitf double mutants, the RPE-to-retina transdifferentiation is massively expanded compared with that seen in mice carrying only Mitf mutations. Hence, during vertebrate eye development, PAX6, MITF, and VAX1/2 are crucial to set up the correct boundaries between retina and RPE and between RPE and optic stalk. Given that the RPE provides critical support functions to the retina, it is not surprising that primary RPE pathologies are a major cause of human blindness. A possible approach to alleviate vision loss in RPE diseases is the use of healthy RPE cells for cell-based replacement therapies. Such cells can be generated, for instance, from induced pluripotent stem (iPS) cells. The process of in vitro RPE generation, however, is still relatively inefficient, and the phenotypic stability and authentic functionality of the cells far from guaranteed. Hence, using our insights into the role of cell-extrinsic and cell-intrinsic factors in RPE development, we shall explore the role of these factors for improvements in the efficiency and function of RPE cells generated in vitro.